Publish in Perspectives - Wednesday, June 19, 2013
The Fruta del Norte (FDN) project in Ecuador. (Photo: Kinross)
President
Rafael Correa’s efforts to fast-track changes to the mining law appear to have
been entirely fruitless.
LATINVEX SPECIAL
Analytica
The end came surprisingly soon. Major
Canadian gold producer Kinross walked – or rather limped – away from its Fruta
del Norte (FDN) project this week, in the midst of parliamentary debate on
introducing some mining-friendlier legislation. "After a great deal of
effort to arrive at a mutually agreeable outcome, it is unfortunate that the
parties were unable to reach an agreement on FDN,” Kinross chief executive Paul
Rollinson said in a public statement on June 10.
Kinross asked the Correa administration to cooperate “in ensuring an orderly
transition that respects the interests of both parties.” Some industry lawyers
read that part of the statement as a warning that it will seek arbitration,
even as the company told shareholders that it would book a whopping $720
million loss for the current quarter. It still holds another 34 concessions
surrounding the FDN project site, in a cluster stretching along the Peruvian
border in the Zamora-Chinchipe province.
FDN holds a proven and probable 6.7 million
ounces of gold and 9 million ounces of silver, with another 3.6 million ounces
of gold and 7.3 million of silver inferred, making it a tantalizing deposit.
The project was underground, rather than the more environmentally damaging
open-pit mining planned elsewhere in Ecuador. Correspondingly, the decision,
almost two months before the deadline for an extension on Kinross’s exploration
contract was to run out (August 1), came as a surprise, even though it was
clear the negotiations were likely to be tough and go down to the wire. “Let's
be clear; if you can't develop FDN, one of the highest grading big deposits out
there, you can't develop anything in Ecuador,” wrote Inka Cola News, a
Peru-based blog specializing in Latin American mining (this of course doesn’t
apply to informal, illegal mining that governments have struggled to control in
Ecuador and elsewhere).
The serious industry,
which except for Dynasty Metals and Mining has been unable to establish
production and hung on with minimal resources since the 2008 moratorium on
major mining, has been shaken by the news.
Already, INV, a Canadian junior mining that took over Iamgold’s 3.3 million
ounce Quimsacocha gold project near Cuenca last year in a share deal for just
$20 million said that it is thinking about leaving as well, likely in a move to
win reassurances from the government officials it says it will meet [this]
week.
Even the Chinese companies environmentalists expect to move in to replace
Kinross have hesitated to move towards completion of their projects, mainly
Ecuacorrientes’s Mirador and San Carlos-Panantza copper mines.
On June 13, the parliament approved the changes to the mining law, with some
elements that will ease investment in “mid-sized” mines.
In the near term however, the effort president Rafael Correa put into
fast-tracking the changes to the mining law appear to have been entirely
fruitless.
This commentary originally appeared in